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When looking from an economic perspective, it is clear that the healthcare industry is unique, and its specific characteristics differentiate it from other sectors. It is necessary to investigate supply and demand in the healthcare market for the understanding of those characteristics. Healthcare insurance also plays a big role in this industry. Healthcare economic features influence not only the healthcare industry but other spheres as well, including business and public policy.
In terms of demand and supply, healthcare differs from other services and has a rather complex structure. For instance, according to Parkin (2017), demand for healthcare can be caused only by an increase in need. In addition, public health usually depends on many factors that often cannot be regulated. Parkin (2017) notes the peculiarity of healthcare demand, pointing out that health is less tangible than most other goods, cannot be traded and cannot be passed from one person to another, although obviously some diseases can (para. 17). It is also worth noting that demand and supply in the healthcare market cannot be determined for certain. It is impossible to know how often and how many people will be ill in the future, not to mention the seriousness of diseases. In this atmosphere of uncertainty, many people resort to the services of insurance companies.
Insurance in healthcare is a rather controversial topic, which causes much debate. For instance, some people believe that private insurance companies are particularly inefficient and too often put profit ahead of people (Mankiw, 2017, p. 13). In addition, there is a phenomenon called moral hazard when people having health insurance are more likely to visit doctors even with minor symptoms (Mankiw, 2017). In this regard, health insurance may often cause an overuse of medical care.
When speaking about healthcare costs, it is important to note that due to its economic characteristics, healthcare may require high spending for the government. According to Morrisey, federal and state governments are a major health care spender in the USA (para. 3). However, as Morrisey notes, increased healthcare costs have led to an increased life expectancy in the US. Of course, this does not negate the moral hazard as many costs within that phenomenon do not influence the level of mortality. However, these findings prove that spending on health insurance and health is worth it.
In addition, the need in medical insurance influences business, as many companies have to provide it to their employees. According to the Affordable Care Act, employers with 50 or more full-time equivalent employees are required to provide health coverage to full-time employees or else pay a tax penalty ( Does my employer, 2020). Needless to say, this policy requires additional costs in the sphere of business as well.
Due to the complexity of its economics, healthcare needs government regulation. For instance, it should be noted that health insurance can be affordable usually only for people with sufficient income. Researchers call healthcare a human right and consider it is as necessary as food (Mankiw, 2017). That is why the government needs to provide policies that allow people with lower income to get health services. Only through sufficient regulation of this sphere, it is possible to provide equal access to healthcare. In addition, changes in the healthcare market that cause higher prices and lower quality of services influence not only the healthcare industry but the nation and government in general. For fixing situations of that kind, it may be required to revise or regulate provisions and principles of public policy.
References
Does my employer have to provide health insurance? (2020). PeopleKeep.
Mankiw, N. G. (2017). The economics of healthcare.
Morrisey, M. A. (n.d.). Health care. The Library of Economics and Liberty.
Parkin, D. (2017). Principles of health economics including: the notions of scarcity, supply and demand, distinctions between need and demand, opportunity cost, discounting, time horizons, margins, efficiency and equity. HealthKnowledge.
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